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Sir in example 2 why did you use overdraft % on reduction of receivable….i don’t see logic behind it
and again i don’t see how receivable have reduced, because
in your lecture in 63 days i can collect on average 3452055
and in 54 days i can collect (3452055*54/63)=2958904.286
and in 365 day i am collecting (2958904.286*365/54)=20,000,000
(3452055*365/63)=20,000,000
so where did you have adjusted for the discount that i am going to offer and what is point of doing separate working for new customer if i don’t adjust for the discount????actually main problem is i am collecting 20,000,000 p.a from receivable with and without discount…
i think 3452055 in 63 days is equivalent to 2958904 in 54 days
shouldn’t the working for new customer be like this
20,000,000-120,000=19,880,000
19,880,000*54/365=2,941,150
reduction on receivable=(3,452,055-2,941,150)=510,905
I do mention this in my lecture.
There are arguments for and against subtracting the discount when calculating the new average receivables, and the examiner is not consistent in his answers.
However the difference that results in only ever small and you would get full marks whether or not you subtracted the discount.which means my way of calculation is also correct…i can workout in the way i have shown above
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